Dollar's return to form halted by resurgent greenback

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The dollar slumped on Friday, exhausted by the week's travails:
no change to interest rates, booming jobs figures and the constant
pressure of US interest rates speculation.

The bumper employment figures, released on Thursday, sent the
dollar to its week high. But a surging US dollar meant the
Australian currency ended the week lower for the third consecutive
time.

National Australia Bank analysts said the US dollar had
"screamed back" on Friday with a sharp fall in the price of crude
oil and a renewed focus on inflation risks in the US.

Crude oil for May delivery fell by US3c, to below $US54 a
barrel, in Thursday's overseas trading.

NAB currency strategist John Kyriakopoulos said the "fall in the
crude oil price was helpful to the US dollar, given the sensitivity
of the US trade deficit to oil".

Comments by Federal Reserve Bank of Philadelphia president
Anthony Santomero also helped the US dollar. Mr Santomero spoke in
Washington of the need for the Fed to remain "vigilant" on
inflation, triggering more speculation of aggressive US interest
rate rises.

The Australian bond market weakened, signalling that traders
have increased their bets that the Reserve Bank will raise interest
rates again in the coming months.

NAB's head of research Peter Jolly said: "Australian
fixed-income traders and investors are still reeling from the run
of data and events this week.

"The unexpected pause by the RBA on Wednesday instigated a
strong rally, which has been halfway reversed following the much
stronger than expected jobs numbers yesterday."

The yield on government 10-year bonds was up to 5.60 per cent
from Thursday's close of 5.58 per cent. The yield on three-year
government bonds rose slightly, to 5.535 per cent from 5.530 per
cent.

US data is expected to drive the Australian dollar next week.
Tuesday's release of minutes from last month's Federal Reserve open
market committee meeting should provide insight into the Fed's
reasons for lifting interest rates. This may bolster the US dollar
against any shocks from US trade deficit figures the same day.